Google Finishes Up its $1.1 Billion Deal with HTC

Google officially finished up its $1.1 billion deal with HTC Corp., helping the search giant chase Apple Inc. in the cut-throat premium handset market.

The deal involves more than 2,000 HTC engineers moving over to Google. They will all remain in Taiwan; Google’s hardware chief Rick Osterloh notes that Taipei is becoming Google’s biggest engineering hub in the Asia-Pacific region.

The deal will also help Google splash deeper into designing its own consumer hardware and special-purpose chips -- like Apple. Google’s most recent Pixel model came with a new image processor to improve the device’s camera. More of this "custom silicon" will come in future Pixel devices, Osterloh said in an interview. 

"You have to be vertical in some cases to really push the envelope for consumers," Osterloh said. "Our intention is to invest in this for the long term. You’ll see a steady increase in investment from us."

The move represents a serious expansion of Google’s hardware efforts, and the most obvious application of the new engineering talent is in its line of Pixel smartphones.

Google worked with a subset of its new HTC hires on a contract basis for the Pixel and Pixel 2, according to a source familiar with the development, and now the company will have a larger R&D team in-house.

Osterloh brought in HTC engineers and designers to help Google control more of the design and production of its products, including working more closely with suppliers.

Google previously focused on software and let manufacturers including Samsung Electronics Co. and HTC handle the hardware. But modern phones offer features like augmented reality and artificial intelligence-based services that need closer integration of software and hardware.

A bigger step would be to create its own "system-on-a-chip" -- the main processors inside phones that Apple now inserts into its devices. Qualcomm Inc. provides the bulk of these chips to Android phone makers, and Osterloh said Google will keep working with the supplier for the foreseeable future.

After the HTC deal, Google plans to expand research and marketing, cut deals with most phone carriers and retailers, and move into new markets. Sales remain limited to nine countries, including the U.S., Germany and Singapore. 

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